Theme park businesses yet to recover from the roller-coaster ride of Covid-19
Theme park businesses yet to recover from the roller-coaster ride of Covid-19
After struggling to stay afloat in the initial months of the pandemic, amusement park companies are banking on inventive digital strategies and gradually increasing customer footfalls to sustain and scale business
Visiting an amusement park was perhaps the last thing on people’s mind as Covid-19 brought life and business as usual to a standstill in 2020. Most theme parks in India, including listed entities Wonderla and Imagicaa, are now starting to get back on their feet after being shut down for nearly nine months. Attempting to emerge out of the closure that impacted their business both financially and operationally, the two companies are now counting on improving safety measures, studying shifts in consumer behavior and implementing online strategies to bring back customers who are cautiously stepping out of their homes again.
The unlock guidelines issued by the Centre on September 30 [applicable from October 1, 2020], allowed amusement park companies to reopen their gates with 50 percent capacity. Individual states have had different regulations for these parks depending on their respective Covid-19 caseloads. Maharashtra, for instance, allowed opening of amusement parks only from December 25.
Theme park companies across India have resorted to a slew of measures to stay afloat, ranging from employee salary cuts and business pivots to monitoring consumer behavior and encouraging people to book tickets online while referring to the park’s operations calendar.
Wonderla Holidays Limited (Wonderla), the listed company that is the largest amusement park chain in the country, opened its parks in Bengaluru, Kochi and Hyderabad in November, December and January respectively. During Q3FY21, Wonderla registered a total footfall of 44,712 customers, of which 36,121 were in Bengaluru. When the company reopened its Bengaluru theme park in November, it was initially operational only during weekends and festivals. Today, parks in all three locations operate at 50 percent capacity, as mandated by the government, with the number of people who can enter the park in a day capped at 4,000 visitors.
“We have been shut for about nine months, starting last March. The way to at least deal with the problem was to try to reduce our costs drastically,” says Arun Chittilappilly, managing director, Wonderla. One of the first things that Wonderla did to reduce costs was salary cuts. Employees continue to be on a salary cut since the parks are not yet open every day of the week. The company is currently running with 75 percent of its total workforce. “We have been able to reduce our costs by almost two-thirds, so that helped us to kind of survive for the past few months at the minimal cost,” Chittilappilly explains over a long call.
In the initial days of the lockdown, the company had pivoted to start Wonderla Kitchen, a cloud kitchen operational out of its Bengaluru theme park, with a capital expenditure of Rs50 lakh. According to analysts who track the company, the cloud kitchen was managing order of nearly Rs14,000 to Rs15,000 per day, which is more or less the break-even point. Wonderla has opened three more kitchens since—in Bengaluru, Hyderabad and Kochi.
But Chittilappilly is clear that the focus is back on parks. “It [cloud kitchens] is not a sizeable business for us. We did it during the Covid-19 period. Now that our parks are open, we are using it as more like a lab to experiment with new ideas for food and then introduce some of those items in our park restaurants,” he says.
For Q3FY21, Wonderla reported revenues of Rs4.92 crore as compared to Rs70 crore during the same period last year. It posted a loss of Rs14.75 crore during Q3FY21 as against a profit of Rs21 crore during the same period in the corresponding year. While it is not fair to compare numbers, the drop indicates the long journey that travel and tourism interfacing companies have to undertake in the long run to stabilise their financials.
Wonderla posted losses after the pandemic started forcing them to shut down their theme parks, but its share price has managed to swing back to the old highs it saw after the market crash in March last year. As on February 11, the company’s shares were trading at Rs 213.70 apiece, while exactly a year back it was trading at Rs 233.75 per share. Its share price had dropped to Rs 104.95 in May last year and since then it has managed to recover to its current price.
The last analyst report that was released on Wonderla was in August 2020 by Sharekhan, which is now owned by BNP Paribas. The report commented that Wonderla’s overall footfall declined by 5.6 percent in FY20 as it was affected by slowdown in discretionary demand and excessive rains that had affected customer demand in key parks. It further said, “We expect FY2021 will be almost a wash-out year for the company with no footfalls in H1FY2021 and minimum footfalls in H2FY2021 (with month-on-month improvement anticipated). We expect a sharp recovery in FY2022.”
Across the world too, it has been a bumpy ride for the industry, with theme parks having to reopen and then shut down multiple times due to the volatile Covid-19 situation. Disneyland Paris, for instance, which reopened in July last year, but was closed again in October after France introduced new guidelines to contain the coronavirus. It now hopes to resume operations in April this year. In Hong Kong, Disneyland reopened its operations on June 18 last year, but closed down by July 15 after a spike in Covid-19 cases, only to resume between September 25 and December 2. It is now, however, shut indefinitely as cases have spiked across the region.
Another theme park company in India, Imagicaaworld Entertainment Ltd (Imagicaa)—the listed firm that runs the amusement park Imagicaa and water park on the outskirts of Mumbai in Khopoli—opened its operations during Christmas 2020, after a closure of almost nine months. The park is open on weekends and public holidays.
The theme park industry gets most of its business between April and June, followed by October and December, the holiday and festive season, says Dhimant Bakshi, joint chief executive officer at Imagicaa. He explains that the April-June period alone accounts for nearly 40 percent revenues. During the quarter ended December 31, Imagicaa reported revenues of Rs5.12 crore, compared to Rs54.90 crore during the corresponding period last year. The revenues were reported primarily from its hotel operations inside the theme park property. It reported a loss of Rs66 crore during Q3FY21, compared to Rs53.95 crore during the same period last year.
Imagicaa is yet to turn profitable. For FY20, the company posted total income of Rs200 crore and losses of Rs404 crore. As on February 12, the company’s shares were trading at Rs5.39 apiece. Last year, the penny stock had crashed to Rs2.37 apiece during the stock market crash in March and it had recovered to hit 520-week high of Rs7.50 per share on December 15, 2020. The shares have again tapered off. “Being temporarily non-operational for more than nine months and missing the key business periods has indeed resulted in a colossal impact for all stakeholders,” Bakshi adds.
Business loss aside, the loss of consumer confidence towards travel is hurting the business. “We leveraged these nine months working on studying fundamental shifts in consumer behavior, monitoring the dynamic consumer sentiment wave, driving consumer engagement activities, outreach to outlining SOP, and safety measures,” says Bakshi.
Chittilappilly observes that he has seen a shift in profile of visitors who are coming to his theme parks. Earlier a mainstay for school and college groups visiting in large numbers during January, February and March, the parks opened to mostly retail footfall in the post-Covid world. “There are small groups of people who are coming in this year and there is sufficient demand,” he says.
While it is still unpredictable as visitor numbers aren’t consistent, Chittilappilly is honest to point out, “We were expecting it to take much longer for us to reach a certain number of footfalls per day but like last month, we had many days when we had to close entry to the park because we were already full. But then there are also days when we don’t get enough footfall.”
With international travel on a standstill and people getting bored at home, theme parks are trying their best to lure them outdoors, promising an open environment, sanitised rides and discounted ticket prices. Wonderla even became the first theme park in the country to secure COV-Safe certification by Bureau Veritas India to demonstrate its hygiene standards.
One common way in which amusement parks are attracting customers is encouraging more online booking of tickets. This helps companies plan how to manage customers and sanitisation of rides, especially during weekends. Amusement park companies are now running creative online campaigns to attract visitors. In the first month, Wonderla offered tickets at a price point of Rs699, nearly a 40 percent discount on its full ticket price. Even now the park’s price point is 10-15 percent lower than 2019 prices but the company is hoping if the demand sustains over the next couple of months then it will roll back to original ticket prices.
Imagicaa also offered a flat 30 percent discount on its theme park tickets. According to the company, the online booking trend has been “phenomenal” as people have taken to booking online while referring to the operations calendar published on the company’s website. It has been seeing strong interest from its primary catchment areas like Mumbai and Pune. “We have seen a week-on-week upward growth trend of nearly 20 percent to date,” says Bakshi, not commenting on specific footfall numbers.
While business has been difficult for all companies in this industry, Wonderla has managed to survive better than others due to significant cash in its books. “That was part of our internal accruals and we were supposed to invest that in our Chennai project. We want to restart our expansion plans and relocate. We're looking at that right now,” Chittilappilly adds. The company’s plans to open a park in Chennai has been delayed at least by a year on account of the pandemic, and Chittilappilly plans to go back to state government of Tamil Nadu to revise its tax exemptions and other things to kickstart the project once again.
Bakshi explains that for now, Imagicaa too is focusing its efforts on driving footfalls to the theme park via lucrative offers that is important from a business sustenance standpoint. “Learnings from reopening of the theme park, and similar marketing activations and strategy, will also be applied when reopening the Imagicaa Water Park,” he says.